The Netherlands Authority for Consumers and Markets (''ACM'') recently announced that after four years it has closed its investigation into possible abuse of a dominant position by AstraZeneca. The investigation focused on the prices that AstraZeneca charged for its Nexium antacid to chemists in hospitals or healthcare institutions (intramural) on the one hand and chemists outside hospitals (extramural) on the other hand. ACM’s investigation showed that the price of Nexium in the extramural sector was 66 to 91 times higher than in the intramural sector. In its extensively substantiated decision (98 pages) of 24 September 2014 (published on 2 December 2014), ACM ultimately took the position that AstraZeneca did not have a dominant position and for that reason cannot have breached the prohibition of abuse of a dominant position (Section 24 of the Dutch Competition Act).
In its decision ACM distinguishes between a market for the intramural and the extramural sale of medicines. The “indirect effect” plays an important part in the competition-law analysis of AstraZeneca’s price policy. That effect means that if a specific medicine is prescribed in a hospital or healthcare institution (intramural use), it is likely that the physician will prescribe the same medicine when the patient has left the hospital or healthcare institution (extramural use). That may be an incentive for pharmaceuticals to set the prices for intramural use at a low level and then, once the patient has grown accustomed to a specific medicine, to charge higher prices for extramural use. Because the price of Nexium in the extramural sector was 66 to 91 times higher than in the intramural sector, AstraZeneca was also suspected of doing so.
ACM nevertheless found that AstraZeneca has not breached the prohibition of abuse of a dominant position. In its decision, ACM first of all distinguishes between an intramural market and a specific market for extramural users created by the indirect effect (i.e. the category of users who were first prescribed Nexium in hospital and were then “locked in” after being discharged). ACM concludes with regard to the intramural market that the Nexium market share was less than 30% and that a dominant position could therefore be precluded. With regard to the extramural market ACM found that there was reasonable doubt that AstraZeneca could operate independently in relation to the group of extramural Nexium users resulting from the indirect effect. AstraZeneca therefore does not have a dominant position on that market either. That conclusion puts an end to a four-year and very thorough investigation by ACM.
Regardless of the content of the outcome in this specific case, it is fully coherent with ACM’s great reticence to investigate cases related to abuse of a dominant position (see also our earlier blogs here and here). With its negligible track record, ACM has therefore held an exceptional position in Europe for some time already. In 2011 already an investigation showed that the Netherlands is among the countries with the lowest number of investigations and sanctions in the field of abuse of a dominant position.
That situation did not change in 2014; in that year ACM did not find in a single case that a company had abused its dominant position. In response to a complaint it did, however, make a commitment decision regarding Buma/Stemra. With reference to its prioritisation policy, ACM furthermore rejected various complaints on the grounds of lack of priority (Filmclub Naaldwijk, SBOH and UPS systems). To date, both the Rotterdam Court and the Trade and Industry Appeals Tribunal have given ACM broad discretionary powers to decide what cases it will and will not handle. In the case of the complaint regarding the UPS systems, however, ACM opted for a form of informal settlement by expressly urging manufacturers of UPS systems to create a level playing field. In the few cases related to abuse of a dominant position that ACM considers worthwhile investigating no sanctions are usually imposed (e.g. the aforesaid Buma/Stemra case and, albeit on appeal, the somewhat mysterious case against GasTerra (the principal decision in which was never published).
Not all the supervisory authorities within and outside the European Union are as passive as ACM when it comes to abuse of a dominant position. Within the European Union the French competition authority, for instance, has investigated a much larger number of cases. Although it rejected a complaint against Vente-privee.com (an appeal is pending), an investigation into abuse of a dominant position by the French railways SNCF and by Nespresso gave rise to two commitment decisions. The French competition authority furthermore imposed a penalty of €1.6 million on Société Nouvelle des Yaourts de Littée on the grounds of abuse of a dominant position, for making derogatory comments about a competitor. Finally, Cedegim was recently fined for abusing its dominant position on the market of databases for medical data.
The European Commission also puts up a good fight in enforcing the prohibition of abuse of a dominant position. Although it has rejected several complaints on the grounds of lack of priority (e.g. the complaints against Magyar Suzuki Corporation, UEFA, Visa and MasterCard, and EDF), the Commission has fined several companies on the grounds of abuse of a position of power (including Slovak Telecom, e.g. for engaging in a price squeeze, Servier for patent settlements and OPCOM for discriminating against European electricity traders that are not domiciled in Rumania). The Commission also found that both Motorola and Samsung had abused their dominant position by making improper use of certain essential patents. It nevertheless decided not to impose a fine because there were no precedents from which Motorola and Samsung could have concluded that their behaviour (including frequently litigating against Apple, while Apple had stated that it wished to purchase a licence on the basis of FRAND conditions) could be qualified as abuse.
It is notoriously difficult for a competition authority to substantiate cases based on abuse of a dominant position. Such cases often require extensive investigation and each step in such an investigation is often subject to legal/economic debate (Has the market been delineated correctly? Can the company in question actually operate independently? Is the behaviour giving rise to possible exclusion effects?). In light of these complications it is understandable that ACM does not give priority to the enforcement of the prohibition of abuse of a dominant position. But the question nevertheless presents itself whether ACM has not overstepped the bounds in this regard. Its track record in the past few years is so poor that companies that have (or are believed to have) a dominant position can consider themselves impervious to government action, which may have negative consequences for newcomers, the competition process and innovation.
Although the Netherlands was known as a “cartel paradise” when the Competition Act entered into force in 1998, ACM’s actions in the subsequent years have sufficiently demonstrated that cartels are unacceptable. But the Netherlands must be wary of becoming a monopoly paradise: an environment in which dominant companies can unrestrictedly dictate the competition conditions, possibly to the detriment of their competitors, their customers and (ultimately) the consumers. It is also worth noting in this regard that it is apparent from a ruling of the Trade and Industry Appeal Tribunal that if enforcement is in the public interest ACM must, in principle, exercise its powers of enforcement (barring exceptions). It remains to be seen whether ACM’s reticence to investigate abuse of a dominant position is consistent with that obligation.